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Income Exempt from Tax

  • Compensation for loss of employment and payments for restrictive covenants

-    full exemption if due to ill health; or

-    RM10,000* for every completed year of service with the same employer / companies in the same group. *Increased to RM20,000 for individuals who ceased employment during the period from 1 January 2020 to 31 December 2021.

  • Dividends paid, credited or distributed by co-operative societies to their members.
  • Fees or honorarium (not part of official duties) for validating, moderating or accrediting franchised educational programmes in higher educational institutions.
  • Foreign income of any person (other than a resident company carrying on the business of banking, insurance or sea or air transport) arising from sources outside Malaysia and remitted into Malaysia. This exemption is no longer applicable to tax residents of Malaysia w.e.f 1 January 2022. 
  • Grant or subsidy received from the Federal or State Government.
  • Green SRI sukuk grant issued in line with the Securities Commission’s guidelines and SRI sukuk and bond that meets the ASEAN Green, Social and Sustainability Bond Standards approved by the Securities Commission Malaysia (applications received by 31 December 2025).
  • Income (other than dividends, lending fees, interest earned on collateral and rebates) arising from a loan of securities listed on Bursa Malaysia and the return of the same or equivalent securities, and the corresponding exchange of collateral, in respect of securities borrowing and lending transaction under a Securities Borrowing and Lending Agreement.
  • Income from employment on board a ship (defined) used in a business operated by a resident owner of a ship registered under the Merchant Shipping Ordinance 1952.
  • Income from director’s fees received by a non-Malaysian citizen director of a Labuan entity until YA 2025.
  • Interest paid / credited to non-resident companies, in respect of :

-    government securities; or

-    sukuk or debentures issued in Malaysian Ringgit (other than convertible loan stock) approved or authorised by, or lodged with, the Securities Commission (SC).

The exemption does not apply to interest paid or credited: 
-     to a company in the same group; or 
-     by a special purpose vehicle (SPV) to a company pursuant to the issuance of asset-backed securities lodged with the SC where the company and the person who establishes the SPV are in the same group (w.e.f. 1 January 2022)

  • Interest or bonus, gains or profits received by a resident individual from deposits placed in licensed institutions.
  • Interest or discount paid / credited to any individual, unit trust and listed closed-end fund in respect of:

-    bonds or securities issued or guaranteed by the Government;

-    debentures or sukuk (other than convertible loan stock) approved or authorised by, or lodged with, the Securities Commission; or

-    Bon Simpanan Malaysia issued by the Central Bank of Malaysia.

  • Interest paid / credited to any individual in respect of Merdeka bonds issued by the Central Bank of Malaysia.
  • Interest paid / credited to any person in respect of any savings certificate issued by the government.
  • Interest paid / credited to any person in respect sukuk originating from Malaysia (other than convertible loan stock) issued in any currency other than Malaysian Ringgit and approved or authorised by, or lodged with, the Securities Commission (SC), or approved by the Labuan Financial Services Authority (Labuan FSA).

The exemption does not apply to interest paid or credited:

-     to a company in the same group;

-     to licensed bank, licensed Islamic bank and prescribed development financial institution; or

-     by a special purpose vehicle (SPV) to a company pursuant to the issuance of asset-backed securities lodged with the SC or approved by Labuan FSA where the company and the person who establishes the SPV are in the same group (w.e.f. 1 January 2022)

  • Pensions, which is derived from an employment exercised in Malaysia where the recipient has reached the age of 55, or the compulsory retirement age or retire due to ill health.
  • Perquisites (in cash or in kind) for long service (more than 10 years of employment with the same employer), past achievement or service excellence, innovation, or productivity award up to an amount or value of RM2,000 per YA.
  • Profit paid, credited or distributed to partners by a limited liability partnership.
  • Profits earned by individual investors from investments made (during the period 1 April 2016 to 31 March 2019) through an Investment Account Platform is exempted from tax for 3 consecutive years.
  • Prize money received from recognised e-sports tournaments
  • Retirement gratuities are fully exempt:

-    where the retirement is due to ill health; or

-    on or after reaching the age of 55 or other compulsory age of retirement*

-    upon reaching compulsory retirement age pursuant to an employment contract or collective agreement at the age of 50 but before 55*

* Employment has lasted 10 years with the same employer or with companies in the same group.

  • Retirement gratuity or termination payment other than gratuities which are fully exempted, up to an amount not exceeding RM1,000 per completed year of service.
  • Royalties received by an individual resident in Malaysia in respect of:

 

Amount exempted per YA (RM)

Publication of, or the use of, or the right to use, any artistic work/ Recording discs or tapes

10,000

Publication of, or the use of, or the right to use, any literary work or any original painting

20,000

Any musical composition

20,000

 

  • Royalties received by non-resident franchisors from registered private higher educational institutions for approved franchised educational programmes.
  • Statutory income derived from members’ subscription fees received by trade associations.

This publication is a quick reference guide outlining Malaysian tax information which is based on taxation laws and current practices. This booklet also incorporates in coloured italics the 2022 Malaysian Budget proposals based on the Budget 2022 announcement on 29 October 2021 and the Finance Bill 2021. These proposals will not become law until their enactment and may be amended in the course of their passage through Parliament.

This booklet is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining the liability to tax in specific circumstances. No responsibility for loss to any person acting or refraining from acting as a result of any material in this publication can be accepted by PricewaterhouseCoopers. Readers should not act on the basis of this publication without seeking professional advice.

 

Published by
PricewaterhouseCoopers Taxation Services Sdn Bhd (464731-M)
Level 10, 1 Sentral, Jalan Rakyat, Kuala Lumpur Sentral,
P.O. Box 10192, 50706 Kuala Lumpur, Malaysia
Tel: 03-21731188 Fax: 03-21731288


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